Operational Restructuring in Plant Engineering and Special Machinery

German Engineering vs. Good Enough Engineering

The traditional ethos of “German Engineering” is characterized by the highest quality, technological perfection, and a high degree of customized technical solutions. In practice, however, this standard often leads to overly complex solutions. This over-engineering increases the cost of technical implementation, extends development times, and raises engineering costs—without the customer actually needing or even noticing the corresponding added value.

The “Good Enough Engineering” approach deliberately counters this. The focus is on a consistent orientation toward actual customer benefit: understanding the customer’s product specifications, identifying must-have and nice-to-have requirements, and implementing the necessary functions at the best possible cost. Companies that adopt this approach increasingly rely on modular systems and standardized components for functional implementation. This significantly reduces the proportion of custom development.

In practice, engineering efforts can be reduced by 20 to 30%, and project durations can be significantly shortened. For example, by introducing a modular system, the time to quote was halved to 6 weeks. At the same time, the EBIT margin rose from 4% to 9% as economies of scale were leveraged and customizations were reduced.

Reliance on a few large projects

The strong focus on OEMs and Tier suppliers has historical roots in many companies, as the automotive industry has been a reliable and high-volume customer for decades. However, with the industry’s current transformation—driven in particular by electrification, digitalization, and volatile sales markets—this environment has changed fundamentally.

Investment decisions are being made on a shorter-term basis or postponed, which directly leads to fluctuating order intake. Declines of 10 to 30% in individual years are not uncommon. At the same time, OEMs are increasing pressure on their suppliers, resulting in price reductions of 5 to 10% per project.

Companies are countering this trend by diversifying strategically into new industries. The development of expertise in areas such as medical technology or the semiconductor industry is not random but is based on a systematic analysis of market attractiveness and existing technological capabilities.

One example shows that a company was able to reduce its automotive share from 70% to 40%. By entering the semiconductor industry, the company simultaneously achieved higher margins, resulting in an increase in EBIT of approximately 3 percentage points.

Dependence on the automotive industry

The strong focus on OEMs and Tier suppliers has historical roots in many companies, as the automotive industry has been a reliable and high-volume customer for decades. However, with the industry’s current transformation—driven in particular by electrification, digitalization, and volatile sales markets—this environment is undergoing a fundamental shift.

Companies are responding to this development by diversifying strategically into new industries. The development of expertise in areas such as medical technology or the semiconductor industry is not random but is based on a systematic analysis of market attractiveness and existing technological capabilities to minimize market entry risks as much as possible.

Reducing the automotive share from 70% to 40%, combined with entry into the semiconductor industry, led in one case to an EBIT increase of around 3 percentage points while simultaneously reducing volatility.

Increasing price sensitivity among customers

Increasing price sensitivity is a direct result of growing transparency and the ability to compare offers on a global scale. Customers systematically compare offers and expect clear business case justifications. This leads to declining bid success rates, often below 25%, even when the technical solutions are compelling. In many cases, this is due to a lack of cost focus during the bidding phase.

Successful companies therefore integrate target costing into the bidding process at an early stage. Engineering, procurement, and controlling work closely together to develop solutions within defined target costs. Benchmarks and should-cost models are also utilized.

By introducing a structured target costing approach, the bid win rate was increased from 25% to 35%. As a result, the average project margin improved by 2 to 3 percentage points.

Increasing global competition

International competitors, particularly those from Asia, have significantly lower cost structures and are steadily catching up technologically. Price differences of 20 to 40% are no longer uncommon today. At the same time, innovation cycles are shortening, making speed in order processing a decisive competitive factor. While German companies have traditionally differentiated themselves through quality, this advantage is steadily diminishing.

Plant and special-purpose machinery manufacturers are countering this pressure by industrializing their value-added processes. This includes standardization in engineering, the use of digital tools, and the optimization of the supply chain through global sourcing.

By shifting approximately 30% of purchasing volume to best-cost countries, material costs were reduced by 8 to 12%. This led to an EBIT improvement of 2 to 4 percentage points.

Project acquisition by cross-functional teams

The growing complexity of projects and increasing price pressure are making purely sales-driven bidding processes increasingly ineffective. Often, under time pressure, bids are prepared solely by the sales organization without sufficient validation of technical risks, procurement options, and feasibility.

Cross-functional teams integrate sales, engineering, procurement, and controlling as early as the bidding phase. This allows technical and economic aspects to be evaluated simultaneously and risks to be addressed early on. This results in more realistic bids and significantly reduces the likelihood of margin losses later on.

The introduction of a structured bid management process increased the bid win rate by 5 to 10 percentage points. At the same time, variances between bid costs and actual costs were reduced by over 30%.

Purchasing as an integral part

In many companies, procurement has evolved from a mere order processor into a strategic value driver. Nevertheless, it is often brought into projects too late, resulting in untapped potential.

Early integration enables reliable pricing assumptions and the utilization of supplier expertise. In particular, early supplier involvement leads to better technical and economic solutions. In project execution, procurement plays a key role in ensuring on-time delivery and delivery quality.

The systematic involvement of suppliers as early as the concept phase led to cost reductions of approximately 10% and a shortening of the project duration by about 15%. At the same time, the number of critical delivery delays was reduced by 20 to 30%.

Project Controlling as an Integrated Management Tool

A key shortcoming in many companies in the plant and custom machinery manufacturing sector is inadequate project management. Project management is often primarily based on milestones and budget comparisons at these key dates. This is done without an integrated view of documented solution progress, cost development, and investment risks. As a result, deviations are identified too late, and countermeasures only take effect once a significant portion of the margin has already been lost.

An integrated management approach combines the tracking of project progress, accrued costs, and potential risks to achieving objectives. Earned Value Analysis (EVA) is an established tool for this purpose, as it systematically links planned and actual developments.

The key advantage lies particularly in the fact that not only do past deviations become visible, but reliable forecasts for the remaining project duration and the expected result (Estimate at Completion) can also be derived. In practice, this enables countermeasures to be initiated much earlier. The introduction of a systematic EVA reduced cost variances by 20 to 40%, while project margins improved by 2 to 5 percentage points.

In addition to quantitative performance management, a structured risk management approach is required. Risks are systematically identified, assessed, and linked to concrete mitigation measures. As a result, project controlling becomes an active instrument for safeguarding results rather than merely a reporting tool.